On August 20, 2021, Hong Kong’s Securities and Futures Commission (SFC) published its conclusions (the “Consultation Conclusions“) from last year’s consultation (the “Consultation“) on proposed amendments to the Fund Manager Code of Conduct (FMCC) that will require fund managers to consider climate-related risks in their governance, investment and risk management processes. The Consultation Conclusions set out the SFC’s analysis of the responses to the Consultation, as well as the final amendments to the FMCC that will require fund managers to implement a range of climate-related practices as early as August 20, 2022.

In this Blog Post, we provide a high-level overview of the amendments to the FMCC and highlight key takeaways from the Consultation Conclusions as Hong Kong enters a new phase of sustainable fund management.


The amendments to the FMCC generally seek to implement the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) for Hong Kong’s fund management sector. Managers of “Collective Investment Schemes” must comply with a set of “baseline requirements” on climate-related governance, investment management, risk management and disclosures, including:

  • Ensuring board and management-level oversight of climate-related issues;
  • Identifying climate-related risks relevant to their investment strategies;
  • Considering climate-related risks in risk management procedures; and
  • Publicly disclosing how they manage climate-related risks,

A subset of “Large Fund Managers” must also comply with more comprehensive “enhanced standards” intended to reflect their greater ability to more thoroughly address climate-related risks. For example, Large Fund Managers must make efforts to collect and disclose Scope 1 and Scope 2 greenhouse gas (GHG) emissions data, whereas smaller fund managers are generally not required to disclose specific climate-related data.

For a more detailed summary of the proposals as set out in the Consultation, please see our earlier Legal Update on MayerBrown.com.

Key Takeaways From The Consultation Conclusions
  • The “Large Fund Manager” Threshold Has Increased: The SFC has raised the threshold for Large Fund Mangers from AUM of $4 billion to $8 billion for any three months in the previous reporting year. The increased threshold means that fewer of Hong Kong’s fund managers will be subject to the enhanced standards.
  • Local Entities Can Leverage Group Resources: The SFC clarifies that local fund managers may leverage group resources in managing climate-related risks (e.g., group-level staff), but local management nonetheless retains responsibility for ensuring that local entities comply with the SFC’s requirements.
  • Climate-related Data Concerns Are Real: The SFC recognizes concerns that climate-related data may be difficult to obtain and may, in any event, be of poor quality. Accordingly, the SFC offers fund managers some flexibility in this area. For example, Large Fund Managers are expected to make a “reasonable effort” to disclose GHG emissions data. If data is not available, Large Fund Managers may use official statistics and climate-related information from data providers to generate estimates.
  • Scenario Analysis Should Be Implemented Where Relevant: The SFC clarifies that Large Fund Managers must take steps to implement scenario analysis “to the extent that climate-related risks are assessed to be relevant and material to an investment strategy or a fund they manage”. At this initial stage, Large Fund Managers are expected to assess if scenario analysis is relevant and useful for them and, if so, to develop a plan to implement scenario analysis in a reasonable timeframe.
  • GHG Disclosures Metrics Shift From Intensity To Enterprise Value: In the Consultation Paper, the SFC proposed to require Large Fund Managers to disclose the weighted average carbon intensity (WACI) of their portfolios. In the Consultation Conclusions, the SFC recognizes that many industry participants, including the TCFD, now favor GHG disclosures in terms of enterprise value. Accordingly, Large Fund Managers are now required to take reasonable steps to identify the “portfolio carbon footprint” of the Scope 1 and Scope 2 GHG emissions of a fund’s underlying investments and disclose them at the fund level. The portfolio carbon footprint calculation, set out in Annex E to the Consultation Conclusion, is value based (expressed in tons of CO2 equivalent per million dollars invested), whereas WACI is revenue based (expressed in terms of tons of CO2 equivalent per million dollars of revenue generated by portfolio companies).
  • Fund Managers Have More Time To Comply: The SFC has extended the implementation timeline. Large Fund Managers now have a 12-month transition period to comply with the baseline requirements and a 15-month period to comply with the enhanced standards. All other fund managers have a 12-month transition period to comply with the baseline requirements.

For more information on the management of climate and other ESG-related risks in the asset management industry, please see our comprehensive publication, Private Equity for the Public Interest: The Evolution of ESG and Considerations for Asset Managers and Investors.